Dems quarrel over stimulus plan

On the day Barack Obama sounded a dire warning on the U.S. economy, Democrats of every stripe – governors, mayors and members of Congress – joined in criticizing Obama’s plan to put $300 billion in tax cuts ahead of bricks-and-mortar projects.

“In theory, everybody loves a tax cut, but I have $108 million budget deficit in the current fiscal year” said Philadelphia Mayor Michael Nutter, a Democrat. “I like tax cuts as much as the next person. What I need is to put my residents back to work.”

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The questions highlighted the difficulties Obama faces in speeding his plan through Congress – where his tax cuts are winning some favor among Republicans but vocal opposition from fellow Democrats.

“I think if anything the discussions today have reinforced my judgment that the focus ought to be on roads and bridges and transportation systems,” said Sen. Ron Wyden, an Oregon Democrat who sits on the Senate Finance Committee.

“The idea of going forward with an approach that to some extent reminds me of stimulus [round] one, where you gave people a few hundred bucks, doesn’t strike me as a good way to go.”

In a closed-door meeting with Obama’s economic chief Lawrence Summers and senior adviser David Axelrod, the senators criticized the tax cuts included in the bill and chided the incoming administration for neglecting to include what several believed was a sufficient number of energy projects. Axelrod took pains to describe the conversation as in the “spirit of cooperation.”

“We’re going to get to a place everyone is comfortable with,” said Axelrod. “There is a sense of urgency that we share with members here and I think there is a good faith desire to work together.”

On Sunday, the Obama team indicated that it would spend $300 billion — nearly 40 percent of the estimated $775 billion package — on cutting taxes for consumers and business. The tax cuts include a $1,000 refund for lower and moderate-income families, one of Obama’s main tax-cutting campaign pledges.

That $300 billion is just too much for some Democratic governors, who want Obama instead to devote the money to infrastructure, Medicare and other programs that would help them close ballooning budget deficits.

“To be fair to the president-elect, I think what he’s suggesting is consistent with what he talked about during his campaign,” said Ohio Gov. Ted Strickland, a Democrat. “But having said that, it is my personal belief that the best way to stimulate the economy and to create jobs and encourage an economic recovery is to make resources available that will be spent out.”

Six Democratic governors and 14 mayors turned out for Obama’s speech at George Mason University in Virginia to highlight their need for immediate federal help.

Most took extra care not to criticize the president-elect mere moments after he finished his speech — where Obama predicted economic pain spread across a generation unless Congress gives him the tax cuts and other stimulus.

But governors were clear about their desire to have more money funneled into their dwindling budgets instead of tax cuts.

Massachusetts Gov. Deval Patrick, a close friend of Obama, said he was focused on direct investments into state programs.

“Tax cuts have different stimulative affects,” Patrick said. “But as governors our emphasis is on those other parts, ... the education and the infrastructure investment.”

The state politicians argued that consumers would save their tax cut funds, rather than pour it back into the economy.

“Those are real dollars, and so someone having a tax cut and more money going in their pockets — maybe they will spend a little bit but the reality is people are scared and even folks who have money are not spending it,” said Nutter.

Earlier this week, the governors of New York, New Jersey, Massachusetts, Ohio and Wisconsin urged Congress to fund a two-year, $1 trillion package. Their proposal allotted only $150 billion to middle-class tax cuts.

Patrick said the $150 billion number was included as a way of accounting for the administration’s priorities.

“In trying to fashion something that included some of the issues and interests we knew the administration had, we put that placeholder in,” he said.